NuclearPhynance Archive

Over the weekend I read a comment stating that only stupid people are buying Greek govies at the moment. The reasosing was that in 5 or 10 years time Greek debt will be repaid in anything but Euro. Now, while I don't belief the whole "Greece will leave the Euro zone and the Euro will fall apart" story I was still wondering. The last 5y auction was well recieved, albeit at fat margins.



My own reasoning was that there will be no official bailout, rather a restructuring of existing debt once Greece cannot pay anymore in an Argentinia like manner. Your existing 5yr bond becomes a 30yr bond with a third of the original coupon and only 70% of the original notional, something along those lines.



Am I to pessimistic ? Or are we currently observing "Hunt for Yield - Reloaded" ?

I think it's all quite ironic...



The only people convinced that there will be no default of any sort are people who are flat. As soon as a person becomes an owner of some tasty Greek paper, they become certain that Greece is literally on the brink of the insolvency abyss and they'll be forced to take a painful haircut.



Personally, I wouldn't touch Greece with a 10ft pole here, esp 10y trading at near par. 30y at arnd 70 looks like a better idea, but even that ain't cheap enough.



All in all, the Greece/Eurozone/ECB dance is beginning to increasingly remind me of the Lehman shenanigans. Hope it doesn't end in a similar fashion.

not sure about the longer term picture.

but short term, when the greek bonds have been battered a bit more, i wouldnt be surprised to see some announcements of the german (and maybe other) governments buying greek bonds in return for a few pounds of political flesh.

and then i wouldnt want to be short them.



but i am flat, so i am right there pigeonholed by Martinghoul

What measures do you guys use? I haven't studied these things, but could it be that Greece has some assets they can sell of? As far as I understand one big issue is the accounting. If a company would revise it's numbers this often, this much they really would have a problem.



I often find that many market participants think of events as binary, where as the distribution of probabilities of outcomes is continous. I suppose that is why distressed investing can be so profitable. Finding a model for bankruptcy is kind of hard. The frequenist approach has to fail, because there is so little sample data, especially if it's sovereign debt.

"We remain cautiously bullish on Greece for 3 reasons: 1) Greek spreads are becoming increasingly unsystematic and, in the right proportion, can actually be a source of portfolio diversification..."



House of Morgan, last week.  Diversify your losses with GGBs!



@Macrotrader: I think you're missing the point.  One-off asset sales do not solve structural problems.  There are also plenty of sovereign defaults to study: "Since 1800, 72 countries experienced 166 periods of default or rescheduling...".  And as we all know, you only need 30 observations to assume normality...

>> And as we all know, you only need 30 observations to assume normality...



Well, if you want to put defaults of the years 1800 and 2000 in one bucket you might have enough data points. How would you model the probability of a bail out? And what case studies do you have for the euro?? And how does that compare to Argentina or Russia??? If you put ten apples and one melon in a bucket and blindly measure the average size of apples that number is going to be tilted. The normality assumption only holds if the inputs are drawn from the same distribution, which in this case I would heavily doubt.



>> One-off asset sales do not solve structural problems.



It could be difference between default and non-default. What metric will tell you what assets a country might be able to sell? I doubt that a model can be that smart, certainly not the models of Moody's & Co.

There seem to be three big issues. First, a relatively big proportion of the population is employed by the state. The try to reduce the number of employees now by staffing only one position out of eight retirements, but this is a longer term approach.



Second is unreported employment. Naturally, there are hardly realiable figures but estimates indicate that indeed a significant part of the GDP is created in that way. With all consequences.



Third is corruption. It seems like you can buy almost anything, from driving licenses to better marks for your kids. This has no immediate impact but certainly hinders economic development.



I don't see many assets that could be sold. But if they start to auction some of their islands I might want to buy one Big Smile .

You claimed "there is so little sample data, especially if it's sovereign debt" which is not true.  I'm simply correcting your mistake.  You can of course legitimately question the relevance of the data to the current situation.



The normality part was a joke.  Next time I'll use a smiley.



And in response to, "What metric will tell you what assets a country might be able to sell?", Greece apparently has financial assets worth 30% of GDP (OECD data via UBS).

Greece apparently has financial assets worth 30% of GDP (OECD data via UBS)



Jungle, do you know what these assets are (like stocks of Greek companies or rather Bunds) ?

jungle: Greece apparently has financial assets worth 30% of GDP



They apparently also had a Deficit/GDP ratio below 3% before they joined the Euro.



Have people forgotten that these phuckers LIED about their meeting the Maastricht thresholds? WTF? Bailout... you're kidding, right? Burn 'em. With an acetylene torch!



The whole world has gone insane again.